Posted by: Ben Steverman on May 19, 2008

Stocks hit a four-and-a-half month high today. The S&P 500 is now less than than 9% off its all-time high. As many market commentators have pointed out, this is not a stock market priced for a deep recession. Investors clearly expect earnings and economic data to rebound later this year.

Last week, the respected economist and market strategist Ed Yardeni offered a great summary of economists’ different views:
“Many economists use letters of the alphabet to describe their forecasts for the downturn: There’s the severe V shaped recession followed by a sharp recovery, the double-dip W, the prolonged U, and the dreaded L. I see a saucer shaped pattern for the economy.”
But the true gem was Yardeni’s relay of a description he heard while at a conference up in Canada:
“One wag up North suggested that it might be more like a flying saucer—a UFO recession. We will never be sure if we really saw it, or just imagined it.”
A UFO recession. I like that. It’s probably the best-case scenario for investors. Many have already spotted the UFO and are cowering in their basements — particularly those smarting from falling home prices, banking layoffs or high gas prices. But the rest of us — and most investors — might not notice much at all.
That’s the hope anyway.

Post a comment

Name

Email

Comment

About

Bloomberg Businessweek’s Ben Steverman focuses on the latest moves in financial markets and emerging trends in stocks, bonds, and funds, always with an eye toward giving readers a better understanding of the sometimes confusing and often chaotic world of money.
Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.